Westbrook Partners to offload London trophy asset in Hercules CMBS

Westbrook Partners is set to put a City office trophy up for sale for £185m which would fully repay the outstanding whole loan ahead of debt maturity next January, writes James Buckley.

Westbrook will shortly instruct GM Real Estate to sell Cannon Bridge House, a 283,000 sq ft prime office development at 25 Dowgate Hill, EC4, after the agent reported to the US investor on the rationale for a sale. A sale at £185m would reflect a net initial yield of circa 6%.

Cannon Bridge House is the security of a loan in the Barclays Capital-issued Hercules (Eclipse 2006-4) CMBS transaction.

It also emerged this week that Westbrook has extended the leases of three of the property’s tenants covering 85,412 sq ft – or 32.6% – of the 262,000 sq ft of office space, increasing the weighted average unexpired lease term to around seven years.

Cannon Bridge House is multi-let to tenants including Natixis Capital Partners, IG Index, Winterflood Capital, and Tyler Capital.

Westbrook bought Cannon Bridge House in 2006 for £206m in a joint venture with Atlas Capital and Lehman Brothers’ private equity division, financed by a £180m whole loan extended by Barclays Capital.  Barclays split the loan into a £156m senior loan, which was spun into the Hercules (Eclipse 2006-4) CMBS transaction, and a £24m junior loan.

The timing of the sale is thought to be driven by two factors. Firstly, the recent re-gearing of the lease, including the removal of a future break clause; and secondly Capita’s negotiations with the junior lender to delay all future interest payments until the loan’s full repayment at maturity.

If Cannon Bridge House is not sold by the loan’s maturity, on 17 January 2015, the junior lender will accrue interest at 9% per annum.

A sale at circa £185m would cover the outstanding £182.4m whole loan balance, including the £155m Hercules (Eclipse 2006-4) CMBS transaction and a £27.3m junior loan

According to Capita’s quarterly investor report to the April IPD, published today, quarterly net operating income for Cannon Bridge House was £3.0m, down from £3.3m the previous quarter.

GM Real Estate, Westbrook and Capita Asset Services declined to comment.

jbuckley@costar.co.uk & jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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